Oil hov­ers above $88 a bar­rel
amid light hol­i­day trad­ing

Bench­mark oil for Jan­uary de­liv­ery was up 19 cents to $88.21 a bar­rel at late af­ter­noon Singapore time in elec­tronic trad­ing on the New York Mer­can­tile Ex­change. The con­tract rose 34 cents to set­tle at $88.02 on Fri­day.

Many oil traders are tak­ing the next two weeks off amid the year-end hol­i­days. Global crude mar­kets are closed Fri­day for Christ­mas.

An­a­lysts are mulling whether this year's strong global oil de­mand can carry over into 2011. Emerg­ing mar­kets, led by China, have ac­counted for most of the growth in oil con­sump­tion this year as the U.S. and Europe slowly re­cover from re­ces­sion.

"The pos­i­tive de­mand shock has con­tin­ued re­lent­lessly," Bar­clays Cap­i­tal said in a re­port. Prices will likely rise "given the strength in un­der­ly­ing fun­da­men­tals and with macroe­co­nomic sen­ti­ment con­tin­u­ing to im­prove."

Bar­clays said it ex­pects crude to av­er­age $91 a bar­rel next year.

Mor­gan Stan­ley, which is fore­cast­ing that oil will av­er­age $100 in 2011, said higher com­mod­ity prices could fuel in­fla­tion and un­der­mine eco­nomic growth.

" If de­vel­oped

world growth ac­cel­er­ates next year, com­mod­ity prices, par­tic­u­larly oil, could be­come a head­wind for growth, lift in­fla­tion, and prompt pol­icy tight­en­ing, par­tic­u­larly in emerg­ing mar­ket economies," Mor­gan Stan­ley said in a re­port.